2014 (2) TMI 1047 - HC - VAT and Sales Tax

Stay application - Difference between tax paid under the TNVAT Act under Works Contract Act - Suppression of sales - Difference in purchase turnover between the trial balance and the monthly sales tax returns - Held that - A perusal of the material documents reveals that what are all the information available with the assessee had been furnished to the department and the assessee had been duly assessed to tax and the liability had been fixed - sales cannot be construed as Inter State sales and it is only a sales within the State of Tamil nadu, now the respondents have invited the dealer to prove their objections through an audited trial balance and the Profit and Loss Account and undoubtedly, it is for the assessee to prove its objections in accordance with law. As the respondents have proposed to revise the assessment only for non-furnishing of the audited trial balance and the plea of the petitioner that they are prepared to prove their objections with the audited accounts, these writ petitions are disposed of with a direction to the writ petitioner to file their proof of objections within a period of four weeks from the date of receipt of a copy of this order. Thereafter, the respondents shall consider the same in accordance with law and on merits, give an opportunity of hearing to the dealer and pass appropriate orders thereon within a period of eight weeks thereafter. Till such time, the respondents are directed not to proceed with the recovery order - Stay granted.

Issues Involved:
1. Validity of the assessment orders for the years 2007-08, 2008-09, and 2009-10.
2. Requirement of audited trial balance and Profit and Loss Account specific to Tamil Nadu.
3. Validity of the revised notices proposing additional tax.
4. Legitimacy of the recovery notices issued to the banks.

Detailed Analysis:

1. Validity of the assessment orders for the years 2007-08, 2008-09, and 2009-10:
The petitioner company, engaged in the automobile business, was assessed on a self-assessment basis under the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) and the Central Sales Tax Act, 1956 (CST Act) for the years 2007-08, 2008-09, and 2009-10. The assessments were confirmed by the 1st respondent, with nominal discrepancies observed. However, subsequent notices were issued by the 1st respondent asking for additional documents and proposing revised assessments based on alleged discrepancies between trial balances and returns.

2. Requirement of audited trial balance and Profit and Loss Account specific to Tamil Nadu:
The respondent required the petitioner to furnish an audited trial balance and Profit and Loss Account specific to Tamil Nadu to verify the genuineness of the company's purchases. The petitioner contended that it is impossible to procure such documents as per prevailing accounting practices, as the consolidated books of accounts are audited at the company level, not at the entity level. The court acknowledged the petitioner's difficulty in providing these documents but emphasized the need for the petitioner to substantiate their objections with appropriate evidence.

3. Validity of the revised notices proposing additional tax:
Revised notices were issued by the 1st respondent proposing to tax the difference between sales reported in the trial balance and sales turnover reported in the returns at 12.5%, and to levy tax on a best judgment basis on the difference between purchase turnover as shown in the trial balance and the returns. The petitioner argued that there was no sales suppression or purchase omission, attributing the discrepancies to factors like entry tax inclusion and interstate purchases. Despite the petitioner's detailed replies, the 1st respondent rejected the submissions and confirmed the revised tax proposals.

4. Legitimacy of the recovery notices issued to the banks:
The 1st respondent issued recovery notices to the petitioner's banks, freezing their accounts and demanding payment of arrears totaling Rs.282,65,64,788/-. The petitioner challenged these notices, arguing that they were issued without proper consideration of the objections and the evidence provided. The court directed the petitioner to submit proof of their objections within four weeks and instructed the respondents to consider these submissions in accordance with the law, providing an opportunity for a hearing before passing final orders. The court also directed the respondents not to proceed with the recovery order until the objections were resolved.

Conclusion:
The court disposed of the writ petitions with specific directions for the petitioner to furnish proof of objections within four weeks and for the respondents to consider these objections and provide a hearing before making a final decision. The court also stayed the recovery proceedings until the objections were duly considered.

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